UK Mortgage Approvals Rise

With Christmas around the corner, a truncated day of trading is in the offing. However, the day has begun on a cheerful note for Sterling investors with the housing market rally continuing unabated for November, raising hopes of early policy tightening by the BoE, especially in the wake of comments by UK business secretary, Vince Cable, earlier this week calling for a review of the government’s supportive housing policies. Meanwhile, the string of largely positive economic data from the US lately is set to continue today with durable goods orders expected to rebound for November, supporting the Fed decision to trim asset purchases. In the Euro zone, apart from today’s unchanged French GDP print, little activity is expected during the rest of the week.

Pound Sterling – UK Markets

With little in terms of domestic macro releases, the Pound continued to search for direction against the greenback for the second consecutive day. Although weaker than expected US economic data released late in the day led to a brief rise in Sterling, last week’s Fed QE3 tapering decision kept the Pound under pressure while supporting the US Dollar yesterday. Meanwhile, the Pound is trading under pressure against the majors in today’s trading session, even though data just out has shown a further rise in UK mortgage approvals for November, highlighting that the domestic housing market continues to grow at a healthy rate. However, with the BoE implementing measures to restrain the housing boom, it remains to be seen how these numbers hold up in the coming months. With no further domestic economic data on tap for today and with the UK enjoying Christmas and Boxing Day holidays over the next couple of days, movement in the Pound will be dictated by macro releases from across the Atlantic during the remainder of the week.

US Dollar – US Markets

The US Dollar is trading on a stronger footing against the common currency this morning ahead of the release of crucial domestic economic data later today. The November durable goods orders print is expected to build on the recent positive momentum. Additionally, new home sales and the Richmond Fed manufacturing reports will be closely watched by investors today for further direction. However, trading activity is likely to remain restrained over the next few sessions in the wake of the impending holidays. Meanwhile, the greenback traded on a weaker footing against the Euro yesterday amid mixed domestic economic data. While consumer spending rose the most in five months for November, the final reading of the Reuters/Michigan consumer sentiment index came in slightly below market expectations. However, the greenback remained supported against its peers after Richard Fisher, the Dallas Fed President who will be a voting member of the FOMC next year, stated that markets were in a position to absorb a $20 billion cut back in asset purchases as against the central bank’s $10 billion reduction announced last week.

Euro – European Markets

The common currency has nudged lower against the US Dollar this morning after the release of the third quarter French GDP report, which failed to top earlier estimates. The weaker GDP print compared to the second quarter numbers has further highlighted the fact that headwinds in the Euro zone economies persist. However, sentiment indices emerging out of the currency bloc of late has elevated hopes of the recovery gaining traction heading into the New Year. Meanwhile, the single currency traded stronger against the greenback yesterday despite the lack of decisive domestic macro releases, as the combination of mixed US economic data and profit booking by traders underpinned demand for the Euro. With little on the domestic macro front during the rest of the week on account of holidays, the Euro- US Dollar will take direction from news flows emanating from across the Atlantic.

Other Currencies – Highlights

The Japanese Yen is trading lower, albeit in a tight range, against the US Dollar this morning after the Bank of Japan, in its latest monthly economic survey warned that the nation’s economy will be affected by the planned sales tax hike next year. However, the central bank expects the nation’s economic recovery to continue at a moderate pace, on the back of a pickup in exports, domestic demand and improvement in corporate profits. Meanwhile, the Japanese government has refrained from using the word “deflation” in its latest assessment of the nation’s economy, while also pledging to control the spiraling budget deficit during the next fiscal year. With little of note on the domestic macro front today, important US economic releases will drive trading sentiment in the Japanese Yen in the session ahead. Moving ahead, a barrage of domestic economic releases during the rest of the week, including minutes of the latest BoJ policy meeting, consumer price inflation report and unemployment numbers among others will prove crucial for the Japanese Yen against the greenback.